Complaince Simplified

Even after seven month of GST implementation, industry is concerned with glitches in GST portal, cumbersome return filing process and e-way Bill, according to a survey done by Ficci.

“All respondents of the survey pointed out issues with the robustness and volume handling capacity of the GST portal. Problems like delayed reflection of updated data as well as payments, delays in process of input credit set offs, inability to upload heavy files of certain formats and lack of provision to modify or revise errors posed major challenges to businesses,” said Ficci.

It said that respondents suggested that a major revamp of the portal was necessary to make it more efficient. There should be provisions for auto set off of the liability against available credit, it said.

Around 59 per cent respondents to the survey comprised of MSME firms whereas the rest 41 per cent were large firms, said Ficci.

“The other pressing issue that all respondents of the survey raised was the cumbersome procedures and documentation for filing of returns. Monthly filing of GST return has been cited as a cumbersome procedure,” said Ficci.

It said that around 78 per cent of the respondents suggested that the periodicity of return filings for those taxpayers having aggregate turnover above Rs 1.5 crore should be changed from monthly to quarterly.

“For services providers, multiplicity of registrations was a concern as a separate registration is now required with every state where service is being provided,” said Ficci.

There should also be a centralised registration for inter-state services, it said.

Implementation issues related to e-way Bills also are also bothering traders. E-way bill is an electronically generated document which is required for the movement of goods of more then Rs 50,000 from one place to another.

All respondents of the survey pointed out issues with the robustness and volume handling capacity of the GST Portal. Problems like delayed reflection of updated data as well as payments, delays in process of input credit set offs, inability to upload heavy files of certain formats and lack of provision to modify or revise errors posed major challenges to businesses. Respondents suggested that a major revamp of the portal was necessary to make it more efficient. There should be provisions for auto set off of the liability against available credit.

Feedback on Return Filing

The other pressing issue that all respondents of the survey raised was the cumbersome procedures and documentation for filing of returns. Monthly filing of GST return has been cited as a cumbersome procedure. Around 78% of the respondents suggested that the periodicity of return filings for those taxpayers having aggregate turnover above Rs. 1.5 crore should be changed from monthly to quarterly. For services providers, multiplicity of registrations was a concern as a separate registration is now required with every state where service is being provided. Respondents to the survey emphasised that filing of returns be made simpler.There should also be a centralised registration for inter-state services.

Feedback on e-way bill

All respondents have cited likely implementation issues upon the introduction of e-way bill. The respondents found the current limit of 10 kms for the purpose of updating details of goods on the portal to be inadequate. Respondents, especially small businesses, felt that e-way bill need not be introduced as it was only an additional compliance requirement as all details of sale and purchase were readily available on the portal. It was suggested that the minimum limit for requirement be increased to 50 kms and there be no requirement of e-way bill for movement of goods within the city limits.

Businesses, especially exporters faced difficulty to claim refunds. The mismatch between shipping bill date and tax invoice date does not allow initiating refund of IGST paid on exports. They have suggested that this condition of matching shipping bill date and tax invoice should be waived off. Firms which supply raw materials to its SEZs locations located in other states is liable to GST as such a transfer is considered sales and is not getting a zero-rating benefit. Such transfers for captive consumptions should not be charged under GST.

Most respondents also stated that there is a need for greater clarification from the Government on the anti-profiteering provisions to ensure that they do not lead to undue harassment.

Federal indirect tax body Goods and Services Tax (GST) Council is set to revamp the return filing process and further liberalize rules to make compliance easier for taxpayers and boost government revenues.

A meeting of central and state government officials in the capital on 27 February will give final shape to the proposal before the council takes it up on 1 March for approval, a person familiar with the development said on condition of anonymity. The 26th meeting of the council will be held through a video conference.

The council is expected to take measures that will make compliance easier for small businesses and traders, which account for the majority of taxpayers, based on recommendations from a panel led by M. Vinod Kumar, GST chief commissioner for Karnataka.

It is also expected to do away with the requirement of filing tax returns relating to purchases and a comprehensive return on all transactions. It will instead, retain only the summary return to be filed every month (GST return 3 B), the information on which will be complemented by invoices of sales uploaded. That would be sufficient to give the benefit of tax credit to buyers, whose transactions will be reflected in the sellers’ returns.

Small and medium enterprises and traders account for a large number of jobs in India, especially in rural areas, and form a politically significant constituency, which the government does not want to antagonize when polls in eight states are scheduled for later this year and national polls early next year.

According to data available with the ministry of micro, small and medium enterprises, there are as many as 36 million such enterprises in the country, half of them in rural areas, employing over 80 million people and accounting for a third of manufacturing output.

Businesses will be given a transition period of about six to seven months to migrate to the new return filing system, said the official cited earlier.

Another proposal before the GST Council is to have separate deadlines for small and medium enterprises, or SMEs, and large businesses. With the current deadline of the 20th of every month for filing returns and paying taxes for sales in the previous month, the government is facing a delay of more than a fortnight in getting tax payments. The idea is to let large businesses pay taxes by the 7th or 8th every month and let SMEs continue with the current deadline.

“This will enable early realization of tax revenue and reduce the load on the IT system,” a second person privy to the council’s discussions said on condition of anonymity.

The federal body is also exploring whether large businesses could be asked to file taxes for sales in March by the end of the month so that the government could account for that revenue in the 2017-18 fiscal year itself. The council will also consider other changes of a technical nature.

The electronic permit for goods movement under GST should preferably have a higher threshold than the prescribed value of Rs50,000, he added.

Moving away from the complicated system of filing three returns every month, the GST Council is likely to approve a single monthly return with annexure on sales and purchases.

AB Pandey, Chairman, GSTN

Bringing relief to taxpayers, the Goods and Services Tax Council is likely to meet early next month to finalise a new and simplified monthly return filing format.

To this end, GST Network Chairman AB Pandey met with stakeholders including industry chambers and traders on Thursday to get their views on a simplified return filing process.

“All participants are keen for a single and simplified return format,” said a person familiar with the development.

The expert panel under Bihar Deputy Chief Minister Sushil Modi is now expected to meet later this month to finalise its recommendations.

Moving away from the complicated system of filing three returns every month, the GST Council is likely to approve a single monthly return with annexure on sales and purchases. The return filing would be done in a staggered manner by large and small taxpayers between the 10th and 20th of each succeeding month.

It will take up the issue in its meeting in early March. “The Council was expected to meet in the first week but may be postponed to around March 10 due to Holi,” said the source.

After the last meeting of the GST Council on January 18, Finance Minister Arun Jaitley had said that discussions had been initiated on a single return system of GST 3B, and uploading of invoices by the buyers and sellers.

“At a later stage, in case of any differences, they can be asked to explain,” he said, indicating that essentially GSTR 1, 2 and 3 will no longer be used.

Presentations on return filing were also made by Sushil Kumar Modi, who heads the ministerial group on IT system, GSTN CEO Prakash Kumar and Infosys non-executive Chairman Nandan Nilekani.

Apart from return filing, the GST Council is also expected to look into the deferred provision of E-Way Bill and how to restart it.

Additionally, it will review the rates of some items including handicrafts, based on the proposals of the Fitment Committee of officers.

Startups incorporated before 2016 that have got up to Rs 10 crore in angel funding won’t face the so-called angel tax, once changes in the regime are finalised by the Department of Industrial Policy and Promotion (DIPP), which will soon notify the amendment, a senior government official told ET. It will also set up a separate committee for the recognition of such startups so that they get the relief, he said.

“We have finalised the conditions which will resolve the issue of pre-2016 startups,” the
official said.

This will ease the concerns of about 300 startups that received funding from the Angel
Investors Network. ET reported on February 5 that DIPP was working to provide relief to
startups incorporated before 2016. Startups incorporated after 2016 and recognised under the Startup India policy are spared this tax.

“We will have adequate safeguards that would be taken into account when a startup is examined for recognition,” said the official.

Discussions with Experts
The angel tax was introduced by then finance minister Pranab Mukherjee in the finance bill of 2012. The measure was aimed at tackling the laundering of money through high premiums on shares. The tax is applicable on the capital raised by unlisted companies in excess of the fair market value of their shares.

The law reasons that this excess amount is akin to “income from other sources” and should be taxed under Section 56 (II) of the Income Tax Act. This route has been prone to misuse for conversion of black money into white. The income tax authorities had issued a number of notices under this provision with some of them being sent to startups.

With the recognition of startups that were floated prior to the launch of the policy, the tax issues faced by these entities is expected to be resolved. DIPP has had extensive discussions with sector experts and the industry before getting ready to finalise the latest framework.

The income tax department has also asked assessing officers not to take precipitate action in cases relating to startups. Finance secretary Hasmukh Adhia had told ET earlier that it was wrong to call the levy an angel tax.

“We take valuation both on book value as well as discounted cash flow, certified by chartered accountant… If you get a valuation which is higher than DCF value, then we tax it. This is not an angel tax — this is an anti-evasion measure for us,” he said. “But we have said that no adjustment will be made if it is a DIPP-recognised startup.

The Income-Tax Department receives 15-25 lakh Permanent Account Number (PAN) applications per week, and takes a few hours to two weeks to allot the 10-digit alphanumeric identifier, the government has informed Parliament.

The allotment of PAN is being carried out by the tax department through two service providers, NSDL e-Gov and UTIITSL, which collect applications, process them, digitise the data and submit the same to ITD for final allotment of PANs.

“Presently, on an average, 15-25 lakh PAN applications are being received per week.

“The time taken for processing these applications and allotment of PAN generally ranges from few hours to two weeks,” Minister of State for Finance Shiv Pratap Shukla said in a written reply in the Lok Sabha.

As on January 28, 2018, a total of 20,73,434 applications were under process/pending for allotment of PAN and issuance of PAN card, the minister said.

He further said the agreement with the service providers has in-built clause for levy of penalty in case of delay and the same is invoked in appropriate cases.

The government is looking at ways to get traders to issue bills to consumers in a bid to check evasion of goods and services tax (GST), including the option of obtaining bills from a centralised system that comes with invoice numbers given in advance.

A senior government official told TOI that a trader can simply seek a bunch of bills and the numbers would be given to him. The trader can then use these bills when a sales transaction takes place. “In case there is a cancellation, the businessman can send the serial number to us through a message. But, it would be deemed that bills before that number have been used up,” explained the official, who did not wish to be identified.

The government has also set up a committee to examine various options,
including issuing pre-designated bill numbers. The bills can be obtained periodically.
The latest move is part of the government’s efforts to clamp down on tax evasion, which is seen to be rampant and most consumers have observed that traders and shopkeepers are reluctant to issue bills and are seeking cash payments. “Be it a small shopkeeper or an interior decorator, no one wants to issue bills and all of them want cash transactions,” a senior official acknowledged.

While other options, such as offering a discount in GST on card payments, are being explored, the government is hoping that eway bills, reintroduction of reverse charge and invoice matching in some form will help it prevent evasion in the current regime.
The government had hoped that use of various tools would help track transactions better and check evasion but protests after the launch of GST forced it to suspend several of the measures.

In addition, e-way bill took time to develop and technical glitches led to postponement of its mandatory use from February 1. “The government wants the system to be foolproof before it is introduced. It should be issued within a few minutes,” revenue secretary Hasmukh Adhia told TOI on Friday, adding that a fresh date will be notified soon.
E-way bills, which are to be electronically generated, are expected to help the government keep better tabs on goods that are shipped across the country with both interstate and intrastate trade to be covered by June.

It looks like the angel tax issue is finally being laid to rest to the satisfaction of startups. Ramesh Abhishek, secretary in the department of industrial policy & promotion (DIPP), said on Wednesday that if the value of a startup is assessed to be higher (when it receives a funding round) than its assumed fair value, the difference would not be considered as income.

“The notification will be out in the next two weeks. We were in consultation with various angel investors where we realised a lot of things,” said Abhishek, addressing a gathering of angel investors and startups at an event organised by LetsVenture, an angel investment platform for startups.

Earlier at the same event, NITI Ayog CEO Amitabh Kant also mentioned that the government is formalising a solution so that angel investors and entrepreneurs do not have to be bothered by the angel tax issue. “The I-T (income tax) department came out with a circular which provided little relief. We are in detailed consultation and have virtually found a solution. We are formalising a few issues and will be out with a circular soon. We will ensure all of you are hand-held and angel investors are not touched in India,” Kant said.

Niti Aayog CEO Amitabh Kant shared that the government and the Niti Aayog are keen to promote entrepreneurial culture in India and committed at resolving the challenges faced by the startup community including that of angel tax.

The Niti Aayog CEO also said that government officials including of Income Tax Department have been specifically directed to not to harass the startup community. Interestingly, he revealed that the government is about to come out with a fresh circular aimed at resolving the angel tax issue.

“We have already come out with a circular directing the income tax officials to not to harass emerging startups recently. We have virtually found a solution there regarding the taxation issue,” he stated.

Angel tax has remained a long-standing issue between the startup community and the government. However, the dispute became a fierce battleground recently with the tax terrorism launched by the income tax officials by sending more than 200 notices to startups in 2017 alone.

The government has been drawing open flak from startup veterans like Mohandas Pai. Responding to the strong criticism, Arun Jaitley, Union Finance Minister, while presenting the Union Budget 2018,assured the community by stating that additional measures would be taken to foster the growth of venture capital funds in India.